With an eye to next spring’s election, Ontario's Liberal government will slash small business taxes as part of $500 million in new spending aimed at easing the transition to the province’s increasing minimum wage.

Finance Minister Charles Sousa unveiled the government plan in the province’s fall economic statement Tuesday afternoon. The corporate tax rate for small businesses will fall from 4.5 per cent to 3.5 per cent effective Jan. 1, 2018, the same day the province will increase its minimum wage from $11.60 to $14.

Critics of the government’s sweeping labour reform package introduced in May have called for the tax offsets for months to allow businesses to absorb the cost. The government plan will eventually see minimum wage jump to $15 an hour by Jan. 1, 2019.

“We will not back down from these commitments,” Sousa said. “An increase to minimum wage cannot wait. People cannot wait ... delaying an increase is delaying an increase.”

As part of the $500 million package for small business, Sousa said the province will designate that one-third of its procurement spending on goods and services will come from small and medium-sized businesses by 2020.

The government will spend $124 million over three years to help companies with fewer than 100 employees who hire youths aged 15 to 29. The government will pay incentives of $1,000 for each worker hired and another $1,000 for each worker retained for at least six months by a small business.

“We also want to help young people find meaningful employment,” Sousa said. “To find their first job, or take their first steps towards building their career. And we want to support small businesses that hire these young people.”

The province’s economic watchdog, the Financial Accountability Office, has estimated more than 50,000 people could lose their jobs due to the minimum wage increase. A report from the FAO said job losses would be concentrated among teens and young adults, while the number of minimum wage workers in Ontario would increase from just over 500,000 to 1.6 million in 2019.

Business groups have argued that needed offsets for business should have comes months ago.

“Businesses will have started to increase costs, they will have started to let people go, they will have stopped hiring people that they might have hired because they’re planning now under the presumption there is no offset,” Karl Bauldauf spokesman for the The Keep Ontario Working Coalition, which includes the Ontario Chamber of Commerce, has said.

A report from the coalition released in September said the risk of job losses due to the minimum wage increase could be significantly reduced if the government extended the policy phase-in period. An economic analysis of the wage increase by the coalition concluded over 185,000 jobs could be impacted by the hike.

However, many economists support the government move, saying hiking the minimum wage boosts economic activity and increases people’s purchasing power.

Tuesday’s economic statement also covers a number of previously announced government programs including its seniors strategy, opening applications for free tuition for post-secondary students early and creating 1,200 new hospital beds across the province.

Sousa also confirms Ontario’s 2018 budget will be balanced — as will budgets over the next two years.

Highlights from Ontario's fall economic statement

THE CANADIAN PRESS

TORONTO — Ontario's Liberal government released a fall economic update Tuesday that included a tax cut for small businesses as an offset for a minimum wage that will rise to $14 an hour on Jan. 1, and $15 an hour the following year.

Here are some highlights:

The corporate income tax rate for small businesses will be lowered from 4.5 per cent to 3.5 per cent on Jan. 1.

Small businesses with fewer than 100 employees that hire young workers (aged 15 to 29) will get incentives of $1,000 and another $1,000 for retaining that worker for six months.

Producers of locally grown fruits and vegetables will get $60 million in supports.

An apprenticeship training tax credit will be turned into a grant, giving employers $2,500 upon an apprentice’s completion of both level one and level two, $3,500 for completion of levels three and four, and $4,700 when the apprentice gets certification.

The apprenticeship grant would be available to all trades eligible for the current tax credit, as well as in five additional trades: hairstylist, cook, horticultural/landscape technician, baker and appliance service technician.

The government will put $85 million toward mercury remediation in the English-Wabigoon River system, which has affected the Grassy Narrows community for decades, through a trust that will be set up in collaboration with First Nation communities.

Real GDP growth is forecasted to be 2.8 per cent this year, up from the 2.3 per cent projected in the spring budget.

Net-debt-to-GDP ratio is projected to fall to 37.3 per cent this fiscal year

Interest on debt, which is currently about $312 billion, is projected to grow from about $12 billion now to $13.3 billion in 2019-20.

A moderating housing market has left the government with about $300 million less in land transfer tax revenues since projections in the spring budget.